Three Perspectives on New Business Essentials for Law Firms
Nowadays, the legal marketer is no longer just the legal marketer — he or she is the business developer. The client service leader. And now the practice innovation specialist. With the roles of those marketing in law firms constantly evolving, the opportunities to improve the business of law are expanding. Three increasingly popular areas of opportunity lie in pricing, project management and process improvement. Here, three LMA experts provide their perspectives on various aspects of these 3 Ps.
Director of Strategic Pricing
Paul Hastings LLP
What can marketers do to position themselves as experts within their firm on pricing, project management, etc.? And how can they leverage their expertise once they have done so?
Marketing and business development colleagues should take opportunities to partner with the pricing or project management teams when delivering solutions for firm clients. Inevitably, they will have to work together to provide clients what they need, and by keeping lines of communication open and keeping each other involved, those outside of pricing and LPM will quickly begin to understand how these roles add value. Marketing and business development teams have the unique understandings and history about client relationships that pricing and LPM teams might not have right away. By bringing institutional knowledge to the table, the two functions will quickly begin to collaborate on how to provide better solutions. Marketing and business development teams also often have the inside scoop on how to best work with certain practice areas or attorneys within the firm. This insight is often invaluable to pricing and LPM teams. Pricing and LPM teams often have the unique quality to help bridge the gap between financial analysis (the numbers) and the client relationship. When working together effectively, each team can lean on the others in order to provide the whole solution to the partner/client.
What is the benefit of firms working with clients with openness and transparency?
It behooves firms to be open and transparent so that the client understands the processes that we follow internally and why we make decisions the way we do. It’s important for them to understand things, such as the fact that it’s not as easy to get data for ‘X’ request because the information might be disparate and not easily analyzed. The benefit goes both ways too. In an open client relationship, the firm then begins to better understand the pressures on the in-house team — if there’s a budget target, if there are reporting requirements, if they are rewarded for showing a certain percentage of savings, etc. Those little bits of information can help change the perspective at which we approach the relationship going forward. Finding out how things work on both sides and offering input on what can be improved will pay dividends for the future. As one of my favorite clients likes to say, there’s a ‘circle of trust’ that is created by having these types of conversations.
Chief Practice Officer
Akin Gump Strauss Hauer & Feld LLP
How do you tie process improvement together with pricing and project management? Are they really related?
From a high level, I see that pricing has become a pull for project management, and in turn, project management will become a pull for process improvement. Pricing has created the need for project management since many new pricing arrangements require tighter management of matters. Project management will, in turn, highlight the need for process improvement once firms have a better understanding of the various components for each type of engagement. That being said, it will take some time before process improvement takes hold in the legal world. It holds great promise for controlling the costs of delivering services, but the profession will have to go through some evolution before it will be a practical option.
How do you measure/track profitability for matters, clients, etc.?
On a day-to-day basis, we track profitability at the matter level. To put those matter profit levels into context, though, we broaden our view to the client level. For the longer term, I feel the client level is the better point of measurement for profitability. Good clients will have different matters under different practices. We can expect profit levels to vary across those types. So it is better to measure profit performance at the overall client level. We have a formula for calculating the costs of the hours involved in the work. We deduct that total cost from the revenue a matter produced. That method provides us the margin for each piece of work, which we can then compare to practice and firm benchmarks.
How can you help attorneys in developing AFA structures?
The number one factor in developing successful AFA structures is understanding a client’s fee goals. The first line of attack to gain this understanding is talking with the attorney involved to determine his or her understanding of the client’s needs. If the attorney does not have a solid understanding, we can coach them. We sometimes participate in client conversations to help the client better understand their situation and which fee structures make the most sense for their situation. Once the client’s fee needs are understood, it is relatively simple to craft a structure that aligns the client’s needs with your firms’. Done right, this effort results in the proverbial win-win outcome.
Senior Manager, Strategic Pricing
DLA Piper LLP (US)
Are there a lot of firms that are working closely with clients on process improvement aspects of the service they provide? Are there risks in this approach, or are other approaches being used?
It’s hard to say how many firms are taking a formal, programmatic approach to leveraging true process improvement techniques. Some firms are able to embrace it in the culture better than others, and there are a variety of factors that influence that. Those that are able to successfully integrate these practices into their client service delivery processes are being favorably received by clients as the transparency of approach, staffing and process help provide peace of mind that the firms are working as efficiently as possible to bring about the desired outcomes, and that helps define value. This information sharing can also deliver benefits to firms by providing a means for easing some of the pressures of pricing negotiations, because the drivers of the pricing are clear to both sides. The primary risk I perceive is basically not implementing it correctly. There are great benefits to executing the process correctly, but if the process isn’t diligently implemented and followed by all the team members, with the supporting technologies included in the mix, the full benefits may be sacrificed.
How do you see the role of the legal project manager, director of pricing, etc., evolving over the next few years?
I think what we will see is a continued trajectory of increased adoption across the industry, which is already evidenced by the seemingly never-ending series of new opportunities coming online at firms of all sizes, locations and specialties. I can’t foresee a scenario where clients will allow firms not to take these disciplines seriously — the day of the blank check for legal department budgets, chalking it up to “anything could happen,” are gone. On the other side of client demand is the emergence of so many new market entrants that are offering new ways to satisfy demand, and often at lower prices. These forces will require that firms continue to innovate the business of law, and professionals focused on strategic pricing, project management and process design will be crucial to firms.
What I also foresee is the in-house corporate legal functions at companies increasing their adoption of counterparts to the professionals being hired by law firms. There are numerous examples of companies and law firms achieving better results by aligning professional business people on both sides of the equation to systematize, analyze and value the work being performed and purchased, and letting the lawyers practice law. While law firms have built a momentum more quickly, corporate legal departments will begin to increase the pace of growth in these positions as well, creating a more symmetrical approach and process. This symmetry will also be fueled by increasingly reliable data, which will play an even larger role in the business decisions made by firms and companies as it relates to legal services budgets.
This article was featured in the March/April issue of Strategies magazine.